When small businesses and individuals buy health insurance in Minnesota, they usually get help from independent insurance agents.

Those agents, in turn, collect commissions from health insurance companies that likely exceeded $50 million last year just for the state’s small-group and individual markets.

But agents in Minnesota are up in arms because the federal overhaul of the nation’s health care system could eliminate some of their commission revenue without action by the administration of Democratic-Farmer-Labor Gov. Mark Dayton.

For months, the state Commerce Department has been working on plans to create for Minnesota a health exchange where individuals and small businesses can buy coverage starting late next year. Independent agents want to know exactly how they will be permitted to work with customers who buy coverage on the exchange and what kind of pay they will get for their services.

“The overriding frustration right now is the lack of transparency,” said Dave Racer, spokesman for a St. Paul-based group called the Agents Coalition for Health Care Reform. “We don’t know what the Department of Commerce is planning to do.”

Signed into law in 2010, the federal Affordable Care Act calls on states to create health insurance exchanges that will serve as new marketplaces — largely online — for individuals and small groups to purchase coverage beginning late next year.

The law also says the federal government can establish procedures by which states can set rate schedules for the commissions paid from health insurance companies to independent agents.

Initially, the federal government indicated that agents might not be able to receive compensation directly from insurance companies when selling policies through the health insurance exchange, according to state Commerce Department officials. But the guidance has changed over time, officials said, to create an opportunity for agents to receive this compensation.

Commerce officials say they are focused on creating a compensation mechanism that won’t give agents an incentive for enrolling consumers in policies from one insurance company over another.

In an Aug. 2 letter, Commerce Commissioner Mike Rothman sought to reassure agents that the state wants agents to play a significant role in the exchange.

“The federal government puts certain broad limitations on compensation, but we welcome the opportunity to work with you on how agents and brokers can best assist the people and businesses who will purchase coverage in the exchange,” Rothman wrote.

Agents say the compensation issue is just one of many concerns they have about plans for the health exchange.

The federal health law calls on states to create “navigator” programs that will provide consumers with assistance in buying coverage on the exchange. Agents want to know exactly what work the state thinks should be handled by navigators and what work should be handled by agents, said Racer, the spokesman for the agents coalition.

The health law specifically prohibits navigators from being paid commissions from insurance companies.

Agents also are concerned about the viability of the health insurance market outside the exchange, since many consumers will have incentives to buy coverage through the new marketplace in order to access premium subsidies and tax credits. Agents “take a very strong position that there should be a private marketplace under non-exchange rules,” Racer said, so that consumers have more choices.

“A critical concern for our members are the questions they raise about their future role, or lack of role, in the exchange, and whether they should change their business model, or perhaps even their profession,” the Agents Coalition for Health Care Reform wrote in a May letter to Rothman.

During an interview last week, Sandra Schlaefer, an independent agent with King and Companies in Burnsville, put it this way: “The heart of it is that we will go out of business. Ninety-eight percent of our revenue is helping people with their health insurance. If you take 98 percent of your revenue away, you no longer exist.”

In his August response to the agents coalition, Rothman of the Commerce Department said he did not understand the concern about the market outside the health exchange, since officials anticipate its survival. Recommendations issued in January by a Dayton-appointed task force on the exchange stipulate “that plans sold within the exchange should be substantially similar to those sold outside the exchange,” Rothman wrote.

Questions related to navigators and agents are still being addressed by a working group on the issue, Rothman said. As for the viability of agents, the commissioner wrote that the exchange should represent “a significant business opportunity” for the profession.

“We have operated with the understanding that agents and brokers have a significant role to play in the exchange marketplace,” Rothman wrote.

As part of Dayton’s Health Exchange Task Force, the administration convened a working group last year to start working on issues related to agents and navigators, including how the consumer advisers will get paid. Last week, the working group’s schedule suddenly got a lot busier with seven meetings scheduled between now and November.

Resolving the compensation question for agents is a key issue, said Matt Marek, a vice president of sales for Blue Cross and Blue Shield of Minnesota and a member of the working group.

“If state action is not taken, (the law) could prohibit agents and brokers from being able to provide services the way they’re providing them today,” Marek said.

Answering the compensation question also is key to figuring out how much it will cost to operate Minnesota’s health exchange.

Earlier this month, the Commerce Department released projections that it will cost between $35 million and $54 million per year to run the health exchange by 2016. The estimate did not include any costs for commissions to independent agents.

The federal health law includes provisions such as the creation of an “essential health benefit” and a “metal” system for marketing insurance policies that are meant to make it easier for consumers to buy products on the health exchange. That’s one reason why independent insurance agents are concerned about the law, since agents traditionally have helped purchasers deal with the complexity of buying coverage.

The law specifies that insurance policies for most consumers beginning in 2014 must cover a minimum set of essential health benefits (which will be defined by the state). Insurance companies will sell health plans that offer varying degrees of coverage for these — and potentially other — benefits, and group them into bronze, silver, gold and platinum tiers in the health exchange.

Bronze-level plans will cover 60 percent of benefit costs in a plan, while platinum plans will cover 90 percent of benefit costs.

“The purpose of the exchange is to streamline and modernize the health care system,” wrote Liz Doyle of TakeAction Minnesota, a liberal advocacy group, in an email. “The exchange will likewise change the role of brokers in the health care system,” added Doyle, who is a member of the working group on agents and navigators. “Many consumers who currently rely on brokers will be able to choose and purchase health coverage directly on the exchange.”

Even so, the state government faces a significant challenge if independent agents don’t support the health exchange, argued Marcus Merz, chief executive officer of PreferredOne, a health insurer based in Golden Valley.

Almost all small businesses use agents when buying health insurance coverage, Merz said, adding that agents often serve as the human resource departments for companies that aren’t big enough to handle the chores themselves.

A July survey of small-group and individual insurance purchasers conducted for the Commerce Department concluded, among other things, that insurance agents are key to the success of the state’s health exchange. To Merz, that finding and others in the survey illustrate the dilemma for state officials.

“Small employers rely on these guys because they are the distribution system,” Merz said. “So the question is: How do they fit in the exchange world?

“It’s an area where the politicians have tap danced,” he added. “Are you going to replace them? Are you going to cut their pay? Or are you going to welcome them? They can either bring a lot of business into the exchange, or hold a lot of business out.”

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